Some days you wake up and good news jumps at you from out of the blue. As I watched the market open, oh, about 6:20 or so, the news came across the wire that Warren Buffet had just invested some $5 billion into Bank of America. Immediately, the stock jumped 21%. This is good news on two fronts.
The first and most selfish front is that I just recently bought B of A at its depressed levels. Like Mr. Buffet, I am now in the money. In the market of these dog days, it is good to get a winner. I must admit, though, I had my doubts about my bite of the B of A apple, as the news has been definitively and universally bad. As I have said before, though, one has to both wade through and weed out the bad news. Remember, the media sells fear, and with B of A, it was a hard sell. When I looked at the company, it was and still is clear to me that the value was much higher than the beaten down stock price.
The second selfish front, although less so, is that Mr. Buffet is sending out a clear message – the financial sector will be just fine, and, to a larger degree, so will the U.S. economy. True, not every bet Mr. Buffet has ever made has always paid off, but enough of them have to make him one of the best (if not the best) investors in the world. We should all pay attention when his analysis shows up in the form of a $5 billion bet.
European rumors are again flying, as they are wont to do these days. Germany will lose its triple-A credit and the bailout of Greece is failing are two making the rounds today. The results are sky rocketing yields on Greek bonds and a sudden, dramatic intraday drop in the DAX. Oooo … the sky is falling, the sky is falling …
At least for this morning, it appears the market is taking a breather. Although futures for the major indices pointed to a strong opening, and it did open well, the market has since retreated. My guess is the European mess is now working its way back into the market psyche. If not that, profit taking is probable as well. Then again, maybe the market is thinking about tomorrow …
The Bernank is coming. The Bernank is coming. He will save us all, yes he will. On the one hand, this is what the pundits are saying the market is thinking, and this is their explanation for the rise in the market the past two days. On the other, the serious analysts are all saying to a man/woman (almost all) that the market should not expect anything of a magnitude from the Bernank, that he will not announce QE3, nor will he announce any other major move on the Fed’s part. More than likely, he will reiterate the economy is fragile, and that the Fed will do what it can do to keep the ship afloat.
Now, if the pundits were correct for the last two days, and the market rose because it believed the Bernank would announce QE3, or some other magic bullet, then today the market must be thinking differently. Perhaps, it is now like this … The Bernank is coming. The Bernank is coming. What will he say? What will he do? Will he save us all? Ya gotta love it, right?
Trade in the day – Invest in your life …
